Definition, types, characteristics and operation of exporting consortiums

Transcription

1 Definition, types, characteristics and operation of exporting consortiums Eva Pulido, Representative of ICEX, Spain Intra-Regional Relations Workshop on Internationalization and Promotion of Caribbean SMEs Consortiums Santo Domingo, Dominican Republic 8 and 9 July, 2013 SP/XXI-RDCIALC/Di N 13-04

2 Copyright SELA, July,l All rights reserved. Printed in the Permanent Secretariat of SELA, Caracas, Venezuela. The Press and Publications Department of the Permanent Secretariat of SELA must authorise reproduction of this document, whether totally or partially, through The Member States and their government institutions may reproduce this document without prior authorisation, provided that the source is mentioned and the Secretariat is aware of said reproduction.

3 Workshop on Internationalization and SME Promotion Caribbean Consortium 8th 10th July. Santo Domingo 1

4 INDEX 1. SPAIN ECONOMIC STRUCTURE 1.1 Spanish export sector characteristics 1.2 Features spanish SMEs 1.3 Profile of export spanish SMEs 2. COOPERATION AMONG COMPANIES 2.1. Advantages of cooperation among companies 2.2. Types of consortia 2.3. Legal framework for setting up an export consortium 2.4. ICEX export consortia programme 3. IMORTANT FACTORS IN THE CREATION OF AN EXPORT CONSORTIUM 3.1. Success and risk factors 3.2. The project developer 3.3. International marketing plan 3.4. financial economic plan 3.5. Operational rules 3.6. Manager selection 2

5 ICEX is the Spanish Institute for Foreign Trade. Its mission is to help companies in their internationalization process. ICEX has its headquarters in Madrid, 31 offices in Spain and 96 commercial offices around the world. 3

6 FEATURES SPANISH EXPORT SECTOR Important trade deficit. Export Figure 2012: Import figure 2012: ,81 Coverage rate: 87,86%. Geographical concentration of exports. 70% of exports to European Union countries 80% in OECD countries Top destination countries: France, Germany, Italy, Portugal, UK. Concentration of exports in a few indutry branches Major export chapters: - 87: Vehicles - 84: Boilers, machinery - 85: machinery and electrical equipment - 27: Mineral fuels - 72: Function, leather, steel - 39: Plastic - 30: Pharmaceuticals 7 chapters represent 50% of total Small number of exporting companies (35,000 companies exporting stable). The top 50 exporters account for the 32% of total export 4

7 1. SPAIN ECONOMIC STRUCTURE 1.1 SPANISH EXPORT SECTOR CHARACTERISTICS Trade deficit Geographical concentration of exports Concentration of exports in a few industry branches Small number of exporting firms 5

8 1.2 FEATURES SPANISH SMEs Spanish companies by workforce numbers With no employees Sin asalariados Microsize Microempresas (1-9) companies (1-9) Small size Pequeñas companies (10-49) (10-49) Medium Medianas (50-249) size companies (50-249) SME S (0-249) PYME (0-249) Big companies Grandes (+249) (+ 249) Total ,26 % 43 4,30 5,00 0,73 99,8 0, % 6

9 1.2 FEATURES SPANISH SMEs Evolution of exporting Spanish companies Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Number of Exporters Total exports in thousands of euros Exporting companies for the last 4 years Nº of companies with X>= Exporting companies for the last 4 years >=

10 1.3 PROFILE OF EXPORT SPANISH SMEs Small size. Scarce International experience. Lack of regular export activity. Difficult access to funding. Weak International human resources structure Strengthen Marketing Strategy - Branding almost nonexistent. Companies exporting mainly to nearby demanding markets. Innovation to be more competitive. Difficulties in addressing emerging markets. 8

11 2. COOPERATION AMONG COMPANIES Export Consortia are based upon the companies need to cooperate in order to develop new projects and strategic alliances. Alliances focused on foreign markets mean remarkable advantages: Helping companies to jump over new handicaps. Minimizing risks and costs. Boosting international operations. 9

12 2.1 ADVANTAGES OF COOPERATION AMONG COMPANIES Improve financial and human resources capabilities Larger range of products to successfully address new markets. Improve bargaining power. Expand distribution network. Other profitable synergies: Transportation cost reduction. Diffusion of technology and know-how of products. Selling abroad allows: open mind, step up in quality assurance process raise, distribution and customer services. In short, reduce risk and costs in exporting and accelerate international expansion. 10

13 2.2 TYPES OF CONSORTIA According to the aim of the consortia: Promotion Consortium Sales Consortium After-sales service Consortium Purchasing Consortium Member companies brand Own consortium brand According to the characteristics of the members of the consortia. One industry branch consortium o several industry branches consortium According to the trade strategy : Origin consortium Destination Consortium 11

14 TYPES OF CONSORTIA According to legal form : To qualify for ICEX support Consortia must be a new economic structure which has legal entity. The most common: Limited Liability Company. Economic Interest Group. 12

15 2.3 LEGAL FRAMEWORK FOR SETTING UP AN EXPORT CONSORTIUM REGULATIONS In Spain, export consortia do not enjoy of own regulations, so they follow rules of civil and commercial law. 13

16 2.3 LEGAL FRAMEWORK FOR SETTING UP AN EXPORT CONSORTIUM LEGAL ENTITY VS COLLABORATION CONTRACT It isn t essential to create a corporation to regulate an export consortium, enough to have a group of people or companies whose commercial activity is governed by a contract. Adoption of legal framework for consortia Advantages Rights and obligations of the participating companies better defined. Limitation of liability of members in the event of losses. Stronger Image for consortium. Requirement for public aid Drawbacks Set most costly obligations. 14

17 2.3. LEGAL FRAMEWORK FOR SETTING UP AN EXPORT CONSORTIA MAIN LEGAL FORMS - CONSORTIA LIMITED LIABILITY COMPANY Features Profit organization. Capital exceeding 3,000, which is divided into shares. Shares are numbered and each partner holds them. These are non-participating shares. Minimum content of inwards regulations determined by law. Organization: General Board - Board of Directors. Partners Responsability Not personal liable for corporate debt Taxes Subject to corporate tax. VAT taxable for operations done in Spain. 15

18 2.3. LEGAL FRAMEWORK FOR THE SETTING UP AN EXPORT CONSORTIA MAIN LEGAL FORMS - CONSORTIA ECONOMIC INTEREST GROUP Regulated by Law 12/1991 which develops for Spain the U.E laws in this matter. It is aimed to group companies which are engaged in the same or related activities to boost in supply or demand the common services provided by them: studies, procurement, sales, etc... Non profit organization since its objective is to develop auxiliary activities to those of their partners, which are themselves profitable activities. Features They are non-profit (although they carry on profit activity) Its purpose is to develop auxiliary activities to those of their partners. Return benefits to its members based on their participation. It is created by deed to be entered in the Public Register. May or may not have working capital. It must have administrators. 16

19 2.3 LEGAL FRAMEWORK FOR SETTING UP AN EXPORT CONSORTIUM MAIN LEGAL FORMS - CONSORTIA Liability of partners Vicarious liability: each member is responsible for the debts when other members can not pay (outstanding debts after liquidating company assets). Joint liability (each member must take personal responsability for the debts). Tax Not taxed on corporate income tax, participating companies do pay for their own companies. 17

20 2.4 ICEX EXPORT CONSORTIA PROGRAMME Description Supports SME s that want to export or promote jointly their products or services in foreign markets. Target audience: Spanish SMEs. The consortia must consist of a minimum of 3 companies. They need to have an equal share (33%). It is possible to have a financial partner (participation not exceeding the company's minimal participation, although it does not get ICEX support) Financing Percentage of aid: 25% out of eligible expenses. Maximun financial aid: euros/year per consortium (has dropped from 100,000 since Minimis respect EU law no more than Euros per company in the three year period support) 18

21 Eligible expenses Bussiness structure expenses Feasibility Study: carried on before the setting up of the Consortia Start-up costs: licensing fees,... for business startup Personnel expenses: wages and salaries for the Consortium manager, only with a work contract. Commissions are excluded. Rentals: offices and warehouses Professional services: legal, tax, accounting... In relation with the set up and running of the Consortia. 19

22 Expenditure on international promotion: Market research: studies acquired from third parties. Promotional material: brochures, catalogues, posters, websites... Advertising: ad design, translations and media buying. Promotional activities: tastings, exhibitions, point of sale promotions... Human Resources: hiring of P.R. and communication agencies in the target markets Trade: shows exhibition at trade fairs in target countries for Consortia Duration: 36 months from the moment the Consotrium has been founded. 20

23 Conditions: Legal entity Consortia can be set up in Spain (and may have foreign subsidiaries) or abroad. In Span, at least 4 companies. In other target countries: 3 companies. A company can not participate in more than one consortium for the same market (except if one is a sales consortium and the other is a promotion one). A member company can not share capital in other member company. A company can not account for more than 33% of the capital 21

24 Conditions: There may be a financial partner (financial institution, marketer, distributor, manager of the consortium) provided its share is less than 33%. A full time Manager. The consortium must have a three year both commercial strategy plan and viability economic plan. It needs to hand in goals and figures. Annual accounts must be reported to the official trade registry. 22

25 ICEX SUPPORT TO EXPORT CONSORTIA ( ) Industrial Products 169 Consorcios 34,29% Food and wines 120 Consorcios 23,76% Habitat, fashion and other consumer goods 100 Consorcios 20,02% Services 115 Consorcios 21,69% (Cinema, spanish audivisuals etc ) TOTAL 504 Consorcios 100% During 27 years we have supported 504 Consortium and a total of companies. Most of the consortia have been set up within the food and wines industries and machinery. Most of the consortia come from the Basque Country and Valencia 23

26 : CONSORTIA PROGRAMME SUMMARY The average number of member companies is 4,4. 90% consortia: Capital Expenditure in equitable parts. 83% consortia: complementary products. Consortia are mainly created in food industry, industrial products and consumer goods. Only 18% consortia mean the shareholders mainstream export operations. Shareholders look at consortia as a complementary way to foreign trade. 50% consortia are not promoted by shareholders but by an external agent/promotor. 24

27 50% of consortia are run under a free management scheme. European Union and Latinamerica were the target areas. Destination consortia: experienced big companies in international operations joined a consortium to enter & market other countries. Consortia arised to seize business opportunities. 25

28 EXPORT CONSORTIA EFFECT Institutions monitorise whether a consortium remains on duty after the period of public financial support. Taking into account that consortia play the role of exporting schools they are considered as a provisional tool. As soon as shareholders learn to export, consortia are expected to be dissolved within 3/5 years. However, a well-managed consortium could have a longer duration and reach ambitious targets. As soon as 1 st. phase ends and whether different market opportunities arise, the consortium could keep on business with new functions. Reasons for consortia lock out might be low sales figures or over expected success. 26

29 3. IMPORTANT FACTORS IN THE CREATION OF AN EXPORT CONSORTIUM 3.1 SUCCESS AND RISK FACTORS 3.2 THE PROJECT DEVELOPER 3.3 INTERNATIONAL MARKETING PLAN 3.4. FINANCIAL ECONOMIC PLAN 3.5. OPERATIONAL RULES 3.6. MANAGER SELECTION 27

30 3.1 SUCCESS FACTORS Size, economic strength and similar international experience of member-companies in the Consortia All partners must have export orientation. Do not think you are going to profit immediately and not use the Consortium to sell production surpluses the member-companies can not sell in their own countries. Complementary products. If competitive products, member companies need to reach distribution aggrements. Similar quality in products sold. Similar corporate culture and work philosophy among consortium members All consortium partners should agree in selected Manager 28

31 3.1 RISK FACTORS Differences in size, product quality and international experience Disagreement on the companies that become part of the Consortia Leadership by one of the members Competitive Products Lack of fiscal transparency Scarce financial resources Lack of insight regulations Uneven results for member companies (one sells more than the others). Differences over objectives and priority markets 29

32 3.2 PROJECT DEVELOPER It can be: Tasks: An external organization (Chambers of Commerce, Exporters Associations, Public Administration...) An independent consultant Managers who work for any of the member companies Look for companies that are interested in being part of a consortium Keep them inform about set up process and requirements Pre-selection of target foreign markets Ways of funding Search of public financial aid 30 Searching for manager

33 3.3 MARKETING PLAN Once having identified the companies that are part of the Consortium international marketing strategy will be defined Target foreign markets Definition of products and services to export Identify market segments Positioning of products regarding competing products Distribution channels for each market Policy prices and margins Advertising and promotional activities Operational organization of the Consortium 31

34 3.4 FINANTIAL ECONOMIC PLAN Consortium Feasibility Plan for at least four years Minimum two years in order to reach a sales volume Setting sales goals of the Consortia: As a percentage of total turnover or export turnover of the member companies in the country. In regard to the total exports of the products to various markets As a share of import value of each of the selected markets 32

35 3.4 FINANTIAL ECONOMIC PLAN Sources of funding: Social Capital Member Fees Income from selling Public aid Banking 33

36 3.5 OPERATIONAL RULES Apart of the Consortia Articles of Incorporation, it s necessary to design internal regulation, that serves to regulate trade relations especially between partners. Production volume that each company is willing to sell through the Consortium Levels of quality requirements Minimum time members should be part of the Consortia Detailed description of products which will market through the Consortia Orders allocation in those consortia whose members market competitive products. 34

37 3.5 INTERNAL RULES Dealing with of customers that each company had before joining the Consortium Ability to sell complementary products apart from those of the consortium. Set transfer prices in the case of trading Consortia Conditions for new members Creating a brand or common countermark Benefit Sharing System Bussiness dissolution causes Way management bodies work. 35

38 3.6 MANAGER SELECTION Key factor for the success of the Consortia IDEAL PROFILE Higher degree studies Additional Training Fluent in English and other languages Professional senior at least 10 years experience Knowledge of industry and products to be marketed Knowledge and direct experience in sales Ability to negotiate internally with partners Management capability 36

39 4. EXPORT CONSORTIA EXAMPLES CALIDALIA: E-commerce on produced food. HORTIBERIA: Fresh Food. CHAMO / OFIDE: Office furnishing & hardware. ENTER: Logistics. 37

40 CALIDALIA: E-commerce on food. 21 member companies in the food industry (300 trademarks and 40 products). The consortium launched an E-commerce website with operations at the moment in 130 countries. Three different areas: B2B, B2C and B2E. B2B: targeted to ease the buying decision process improving relations with suppliers. B2C: a double communication way between company and consumers. 12 CALIDALIA member companies started up CalidaliaBaltic España, with main office in Tallin, Estonia. 38

41 HORTIBERIA: 9 member companies in the fresh food business (fruits, citrics and vegetables). A wide range of complementary products (30), a close negotiation with suppliers & farmers, an offer all year long and products trazability as well as other international quality requirements. The consortium manager is a well known executive in the spanish fresh food business. Negotiation with great customers obliges to open local offices in Germany, Eastern Europe, United Kingdom and France. 39

42 CHAMO / OFIDE: 5 member companies in the Office furnishing & hardware business targeted to the Arab Gulf countries. After several internal changes and with the 3 years ICEX financial support, 2 showrooms were opened in Dubai and Qatar. The consortium is still in progress and trademark has been consolidated. 40

43 ENTER: Enter is a consortium fosused on the russian market targeted to control the member companies logistic operations in Russia. Besides the shareholders, other new customers are european companies that assure their logistics in Russia. A logistic yard and a local office have been opened for serving customers operations. 41

44 SERRANO HAM Created in 1990, brings together 85% of production. 20 associated companies. Among them, large: Navidul, Campofrío. Two areas of action 1. Quality Certification They have inspectors that go to companies to assess the product (9 months healing, level of fat, water...). The product is labeled with adequate quality and common seals and packaging. Further maintain its own brand. Only part of the production company has the stamp of quality. 2. Generic Product Promotion Advertising campaigns in Germany, France, Portugal, Argentina. The product is presented according to the type and consumer tastes. Linear addition product presentations, etc.. It bears consortia product without company label. Each company has an annual contribution of 6,000 euros. 42